Tit-bits: Words and Swords

Ministerial announcements preceding or replacing appropriate communication by relevant regulatory authorities have left disturbing impressions of a situation which has gone out of hand.

However valid the reasons, the BA Group has been effectively put to the sword. It is time to restore the ship to an even keel and correct the massively damaging repercussions on the international scene

It is a recognised fact that the public and political word has always carried powerful weight, often mightier than the sword. Well-used, it can sustain hope for a better future or rally a nation against the tides of injustice, barbarism and dark ages.

Martin Luther King’s rousing dream comes to mind and so does Nelson Mandela’s call for a peaceful “rainbow nation” after having spent most of his adult life in apartheid’s jails. In the wake of Swami Dayanand’s call for “swaraj” (home rule) in India, powerful nationalist figures like Bal Gangadhar Tilak and Joseph Baptista, both from Mumbai, raised the epic call: “Swaraj is my birthright and I shall have it!”

Churchill in May 1940 to his newly formed Cabinet and later to the House of Commons, announced with eloquence that he could only offer “blood, toil, tears and sweat”. In a less known aside to General Ismay, he is reported to have added: “… poor people! They trust me and I can give them nothing but disaster for a long time.” General Colin Powell, more recently, waved at the UN a white powder envelope epitomising alleged weapons of mass destruction of Saddam Hussein before the US launched the destruction of the dictator and the country.

In a globalised, networked world the public word has immediate far-flung impact and carries a heavy responsibility. Particularly for a country that has patiently, over thirty years, spared no effort vis-a-vis the OECD, the international community and the financial vigilante worldwide tried, against world-place competitors, to further the image of Mauritius as a reputable, sound and transparent international financial centre.

That destination image was badly dented in 2013 with notorious daylight plotters of the Ponzi schemes involving fictitious entities and assets operated by cow-boy outfits taking advantage of public credulity and regulatory loopholes between the Financial Intelligence Unit, the Financial Reporting Council, the Financial Services Commission and the Bank of Mauritius. Too many watchdogs with limited purview and powers, too much was at stake for the shortcomings not to have been addressed effectively. Were they?

When the PM states unequivocally in Parliament that his government has uncovered a long-standing gigantic Ponzi scheme running into 25 billion Rs or more, justifying the closure of Bramer Bank, nobody in any represented embassy, in financial circles here and worldwide, in media and internet highways, can doubt that these have been uttered without vendetta and on the basis of the strongest of evidence.

We were after all abruptly saying that our much-vaunted regulatory system has been hopelessly ineffective in preventing massive financial fraud or scams or Ponzis that stretched over years in what should have been a perfectly regulated environment of internal and external auditors, several regulators and, ultimately, Ministers of Finance who have been either blissfully unaware, complacent or simply turned a blind eye. It was highly debatable whether the international community would commend Government for such acumen and decisive action or scoff the regulatory framework and the pretences of the island as a legitimate reputable financial centre.

The Minister of Finance immediately followed suit by hammering the nail further regarding both the Ponzi term, the alleged scale of malfaisance and the urgency to act decisively to prevent systemic damage to our corporate system further down the road. Top management would be sacked and sued, Dawood Rawat and family would be held to account, and the State Bank of Mauritius would take over Bramer Bank while SICOM would take over BA Insurance.

The MOF and other government Ministers, by this overt and sudden takeover of BA Group, its combined assets, toxic or otherwise, and its liabilities, promised that responsibilities towards customers, suppliers, policy-holders and all stakeholders would be fully discharged and that open bidding would soon sell off the “fleurons” of the demised Group (Iframac, Courts, Appolo Bramwell, others) to that end.

Government has since corrected its stance and now alleges (i) strong grounds to suspect misuse or misappropriation of company assets through illegitimate and unsupervised transfers to personal and family holdings of the BA Chairman, Dawood Rawat, (ii) a Ponzi scheme that was restricted to the Super Cash Back Gold policy concerning some 20,000 policy holders who will be disbarred from announced discharge of responsibilities through government take-over, and (iii) the total unjustified diversions to Dawood Rawat and family could amount to some 300 million US$ (8-9 billion Rs) rather than the figures announced previously.

It remains for auditors, Bank liquidators or BAI Conservators to confirm what exactly are the figures and identify what fraudulent activities took place; if these were averred however, there is no doubt a case for detailed CCID enquiry and potential legal action for what French legislation would dub as “abus de biens sociaux” and “recel”.

Such an investigation would also perforce concern all top echelons of those entities identified as participating in or conniving with such activities; the spotlight cannot escape top management of BAI and Bramer Bank, their auditors and the regulatory bodies in the financial and banking sector. Nor can Ministers of Finance since 2000 fail to explain how they missed what seems glaringly obvious to the SAJ alliance government of today.

Meantime, the rather simplistic outcome scenario presented by the MOF has unravelled, adding to confusion. Neither the State Bank nor the SICOM can be simply dealt by ministerial injunctions and government has had to “nationalise” the Bramer and the BAI. The envisaged sale of any Group companies will have to be negotiated with the BA Investment Administrator to make sure assets are realised to their best market value. The top echelons of BA companies have unexplainedly been integrated to marshal the take-over state entities. The SCBP policy holders cannot be discriminated against or victimised; they were not party-goers but customers of a long established policy scheme, regulated and approved by authorities and available on the market since 2000.

Ministerial announcements preceding or replacing appropriate communication by relevant regulatory authorities have left disturbing impressions of a situation which has gone out of hand. However valid the reasons, the BA Group has been effectively put to the sword. It is time to restore the ship to an even keel and correct the massively damaging repercussions on the international scene.